-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KRkSlJSRv17ejmr6YbMVrzXWbMiPCv5fUHCUqcLENKWsuLG1paobA3P9aLfzRzSx ynPf1asdKjRd2u2SH8UC2Q== 0000731802-99-000015.txt : 19990816 0000731802-99-000015.hdr.sgml : 19990816 ACCESSION NUMBER: 0000731802-99-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATMOS ENERGY CORP CENTRAL INDEX KEY: 0000731802 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 751743247 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10042 FILM NUMBER: 99687106 BUSINESS ADDRESS: STREET 1: 1800 THREE LINCOLN CTR STREET 2: 5430 LBJ FREEWAY CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9729349227 MAIL ADDRESS: STREET 1: 1800 THREE LINCOLN CTR STREET 2: 5430 LBJ FREEWAY CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: ENERGAS CO DATE OF NAME CHANGE: 19881024 10-Q 1 ATMOS ENERGY CORP 10-Q FOR QE 06/30/99 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _______________ Commission File Number 1-10042 ATMOS ENERGY CORPORATION (Exact name of registrant as specified in its charter) TEXAS AND VIRGINIA 75-1743247 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1800 Three Lincoln Centre 5430 LBJ Freeway, Dallas, Texas 75240 (Address of principal executive offices) (Zip Code) (972) 934-9227 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares outstanding of each of the issuer's classes of common stock, as of July 31, 1999. Class Shares Outstanding ----- ------------------ No Par Value 31,073,040 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) June 30, September 30, 1999 1998 ----------- ------------- ASSETS Property, plant and equipment $1,516,909 $1,446,420 Less accum. depreciation and amort. 567,949 528,560 ---------- ---------- Net property, plant and equipment 948,960 917,860 Current assets Cash and cash equivalents 14,441 4,735 Accounts receivable, net 54,359 34,887 Inventories of supplies and mdse. 14,362 15,219 Gas stored underground 19,795 48,909 Prepayments 2,514 3,630 ---------- ---------- Total current assets 105,471 107,380 Deferred charges and other assets 123,573 116,150 ---------- ---------- $1,178,004 $1,141,390 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders' equity Common stock $ 155 $ 152 Additional paid-in capital 288,392 271,637 Retained earnings 112,922 99,369 Treasury stock (91) - ---------- ---------- Total shareholders' equity 401,378 371,158 Long-term debt 381,389 398,548 ---------- ---------- Total capitalization 782,767 769,706 Current liabilities Current maturities of long-term debt 18,218 57,783 Notes payable 110,228 66,400 Accounts payable 50,251 44,742 Taxes payable 12,781 12,736 Customers' deposits 10,289 12,029 Other current liabilities 30,973 30,369 ---------- ---------- Total current liabilities 232,740 224,059 Deferred income taxes 86,483 80,213 Deferred credits and other liabilities 76,014 67,412 ---------- ---------- $1,178,004 $1,141,390 ========== ========== See accompanying notes to condensed consolidated financial statements. ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Three months ended June 30, ------------------------- 1999 1998 -------- -------- Operating revenues $109,590 $137,311 Purchased gas cost 56,214 79,945 -------- -------- Gross profit 53,376 57,366 Operating expenses Operation 29,796 27,280 Maintenance 2,342 2,660 Depreciation and amortization 14,043 12,332 Taxes, other than income 6,783 7,212 -------- -------- Total operating expenses 52,964 49,484 -------- -------- Operating income 412 7,882 Other income 1,126 2,536 Interest charges, net 9,689 7,791 -------- -------- Income (loss) before income taxes (8,151) 2,627 Income taxes (benefit) (2,856) 951 -------- -------- Net income (loss) $ (5,295) $ 1,676 ======== ======== Basic net income (loss) per share $ (.17) $ .06 ======== ======== Diluted net income (loss) per share $ (.17) $ .06 ======== ======== Cash dividends per share $ .275 $ .265 ======== ======== Weighted average shares outstanding: Basic 30,669 29,910 ======== ======== Diluted 30,920 29,941 ======== ======== See accompanying notes to condensed consolidated financial statements. ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Nine months ended June 30, ------------------------ 1999 1998 -------- -------- Operating revenues $581,243 $721,192 Purchased gas cost 324,264 440,254 -------- -------- Gross profit 256,979 280,938 Operating expenses Operation 99,986 96,548 Maintenance 6,169 7,429 Litigation settlement 3,250 - Depreciation and amortization 41,443 36,116 Taxes, other than income 23,188 24,808 -------- -------- Total operating expenses 174,036 164,901 -------- -------- Operating income 82,943 116,037 Other income 5,201 5,540 Interest charges, net 26,928 26,436 -------- -------- Income before income taxes 61,216 95,141 Income taxes 22,336 35,945 -------- -------- Net income $ 38,880 $ 59,196 ======== ======== Basic net income per share $ 1.28 $ 1.99 ======== ======== Diluted net income per share $ 1.27 $ 1.98 ======== ======== Cash dividends per share $ .825 $ .795 ======== ======== Weighted average shares outstanding: Basic 30,464 29,739 ======== ======== Diluted 30,710 29,948 ======== ======== See accompanying notes to condensed consolidated financial statements. ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine months ended June 30, ----------------------- 1999 1998 ------- ------- Cash Flows From Operating Activities Net income $38,880 $59,196 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Charged to depreciation and amortization 41,443 36,116 Charged to other accounts 3,024 4,327 Deferred income taxes (benefit) 6,270 (192) Net change in operating assets and liabilities 17,134 (671) ------- -------- Net cash provided by operating activities 106,751 98,776 Cash Flows From Investing Activities Capital expenditures (79,782) (82,533) Retirements of property, plant and equipment 4,215 2,937 ------- -------- Net cash used in investing activities (75,567) (79,596) Cash Flows From Financing Activities Net increase in notes payable 43,828 1,950 Cash dividends paid (25,327) (23,810) Issuance of long-term debt - 1,000 Repayment of long-term debt (56,724) (11,796) Issuance of common stock 16,745 15,748 ------- -------- Net cash used in financing activities (21,478) (16,908) ------- -------- Net increase in cash and cash equivalents 9,706 2,272 Cash and cash equivalents at beginning of period 4,735 6,016 ------- -------- Cash and cash equivalents at end of period $14,441 $ 8,288 ======= ======== See accompanying notes to condensed consolidated financial statements. ATMOS ENERGY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1999 1. Unaudited interim financial information In the opinion of management, all material adjustments necessary for a fair presentation have been made to the unaudited interim period financial statements. Such adjustments consisted only of normal recurring accruals. Because of seasonal and other factors, the results of operations for the nine month period ended June 30, 1999 are not indicative of expected results of operations for the year ending September 30, 1999. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q, and should be read in conjunction with the audited consolidated financial statements of Atmos Energy Corporation ("Atmos" or the "Company") in its 1998 Annual Report on Form 10-K. The condensed consolidated balance sheet of Atmos as of June 30, 1999, the related condensed consolidated statements of income for the three-month and nine-month periods ended June 30, 1999 and 1998, and the condensed consolidated statements of cash flows for the nine-month periods ended June 30, 1999 and 1998, included herein have been subjected to a review by Ernst & Young LLP, the Company's independent accountants, whose review report is included herein. During fiscal 1998 and 1999 management has evaluated and restructured the organization and operation of certain segments of the Company. As a result, certain prior year balances have been reclassified to be consistent with the current presentation. Common stock - As of June 30, 1999, the Company had 100,000,000 shares of common stock, no par value (stated at $.005 per share), authorized and 31,039,292 shares outstanding. At September 30, 1998, the Company had 30,398,319 shares outstanding. 2. Rates The Company's ratemaking activity over the three-year period ended September 30, 1998 was discussed in Note 3 of notes to consolidated financial statements in the Company's Form 10-K for the year ended September 30, 1998. The Trans La Division appeared before the Louisiana Public Service Commission in June 1999 for a rate investigation and to redesign rates to mitigate the effects of warm weather. A decision is expected from the Louisiana Commission later in 1999. The Western Kentucky Division requested an increase in rates of approximately $14.1 million from the Kentucky Public Service Commission in May 1999. A decision is expected later in 1999, with any new rates being placed in effect in early 2000. Subsequent to June 30, 1999, the Energas Division filed rate cases in its West Texas System cities and Amarillo, Texas, requesting rate increases totaling approximately $13.2 million and recovery of costs related to certain distribution system replacement projects. Later in 1999 or early 2000 the Company plans to request a rate increase of approximately $1.1 million in the environs areas outside the city limits of the West Texas System cities and Amarillo, Texas for total increases of $14.3 million being sought in Texas. Rates in areas outside the city limits in Texas are subject to the jurisdiction of the Railroad Commission of Texas. 3. Contingencies For a review of the status of the Company's litigation and environmental matters as of September 30, 1998, please refer to Note 5 of notes to consolidated financial statements in the Company's Form 10-K for the year ended September 30, 1998. Material contingencies and new developments since September 30, 1998 are discussed below. Litigation In November 1997, a jury in Plaquemine, Louisiana awarded Brian L. Heard General Contractor, Inc., ("Heard") a total of $177,929 in actual damages and $15 million in punitive damages resulting from a lawsuit by Heard against the Trans La Division, the successor in interest to Oceana Heights Gas Company, which the Company acquired in November 1995. The trial judge also awarded interest on the total judgment amount. The claims were for events that occurred prior to the time Atmos acquired Oceana Heights Gas Company. Heard filed the suit against the Trans La Division and two other defendants, alleging that gas leaks had caused delays in Heard's completion of a sewer project, resulting in lost business opportunities for the contractor during 1994. The Company immediately appealed the verdict. However, on March 24, 1999, the Company announced that it had reached a settlement of the case as a result of mediation discussions. The parties agreed to settle the case for $3.5 million. In the settlement, neither Atmos nor the Trans La Division conceded liability. Atmos paid $3.25 million and the remaining $.25 million was paid by Oceana Heights Gas Company's insurers. In exchange, the Company obtained a full release from Heard of all claims against Atmos and the Trans La Division. In Colorado, the Greeley Division is a defendant in several lawsuits filed as a result of a fire in a building in Steamboat Springs, Colorado on February 3, 1994. The plaintiffs claimed that the fire resulted from a leak in a severed gas service line owned by the Greeley Division. On January 12, 1996, the jury awarded the plaintiffs approximately $2.5 million in compensatory damages and approximately $2.5 million in punitive damages. The jury assessed the Company with liability for all of the damages awarded. The Company appealed the judgment to the Colorado Court of Appeals, which reversed the trial court verdict and ordered a new trial. The Colorado Supreme Court upheld the Court of Appeals reversal and order for a new trial. As a result of mediation, a settlement was reached with five of the claimants, leaving only three remaining claimants with aggregate claims of approximately $2.0 million. The Company does not expect the final outcome of this case to have a material adverse effect on the financial condition, the results of operations or the cash flows of the Company because the Company believes it has adequate insurance and reserves to cover any damages that may ultimately be awarded. From time to time, other claims are made and lawsuits are filed against the Company arising out of the ordinary business of the Company. In the opinion of the Company's management, liabilities, if any, arising from these other claims and lawsuits are either covered by insurance, adequately reserved for by the Company or would not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. Guarantees The Company's wholly-owned subsidiary, Atmos Energy Marketing, LLC ("AEM"), and Woodward Marketing, Inc. ("WMI"), sole members of Woodward Marketing, LLC ("WMLLC"), act as guarantors of up to $12.5 million of balances outstanding under a $30.0 million bank credit facility for WMLLC. AEM guarantees the payment of up to $5.6 million of borrowings under this facility. A balance of approximately $.7 million was outstanding under this credit facility at June 30, 1999. AEM and WMI also act as joint and several guarantors on certain accounts payable for gas purchases. AEM has agreed to guarantee payables of WMLLC up to $40.0 million of natural gas purchases and transportation services from suppliers. WMLLC payable balances outstanding that were subject to these guarantees amounted to $8.3 million at June 30, 1999. Environmental Matters Atmos is the owner or previous owner of manufactured gas plant sites which were used to supply gas prior to availability of natural gas. The gas manufacturing process resulted in certain by- products and residual materials including coal tar. The manufacturing process used by the Company was an acceptable and satisfactory process at the time such operations were being conducted. Under current environmental protection laws and regulations, the Company may be responsible for response actions with respect to such materials, if response actions are necessary. The United Cities Division owns or owned former manufactured gas plant sites in Keokuk, Iowa, Johnson City and Bristol, Tennessee, Hannibal, Missouri, and Americus, Georgia. In June 1995, United Cities Gas Company ("UCGC") entered into an agreement to pay $1,787,000 to Union Electric Company whereby Union Electric agreed to assume responsibility for UCGC's continuing investigation and environmental response action obligations for soil contamination as outlined in the feasibility study for the former manufactured gas plant in Keokuk. The $1,787,000 was paid in five annual installments. The last installment was paid in July 1999. UCGC and the Tennessee Department of Environment and Conservation entered into a consent order effective January 23, 1997, for the purpose of facilitating the investigation, removal and remediation of the Johnson City site. UCGC began the implementation of the consent order in the first quarter of 1997. The Company is unaware of any information which suggests that the Bristol site gives rise to a present health or environmental risk as a result of the manufactured gas process or that any response action will be necessary. The Tennessee Regulatory Authority granted UCGC permission to defer, until its next rate case, all costs incurred in Tennessee in connection with state and federally mandated environmental control requirements. On July 22, 1998, Atmos entered into an Abatement Order on Consent with the Missouri Department of Natural Resources addressing the former manufactured gas plant located in Hannibal, Missouri. Atmos, through its United Cities Division, agreed in the order to perform a removal action, a subsequent site evaluation and to reimburse the response costs incurred by the state of Missouri in connection with the property. The removal action was conducted and completed in August 1998 and the site evaluation will be conducted in 1999. On February 25, 1999, the Missouri Public Service Commission issued an Order authorizing Atmos to defer the costs associated with this site. The Order is effective for two years. As of June 30, 1999, the Company had incurred and deferred for recovery $1.1 million, including $258,000 related to an insurance recoverability study, and accrued and deferred for recovery an additional $750,000 associated with the preliminary survey and invasive study of the Johnson City, Hannibal and Bristol sites. Atmos is currently conducting an investigation pursuant to a Consent Order between the Kansas Department of Health and Environment ("KDHE") and UCGC. The Order provides for the investigation of mercury contamination at gas pipeline sites which utilize or formerly utilized mercury meter equipment in Kansas. Atmos is currently in the process of finalizing a Consent Order with the KDHE for remediation of certain of these sites. As of June 30, 1999, the Company had identified approximately 720 sites where mercury may have been used and had incurred and deferred $100,000 for recovery. In addition, based upon available current information, the Company accrued and deferred for recovery an additional $280,000 for the investigation of these sites. The Kansas Corporation Commission has authorized the Company to defer these costs and seek recovery in a future rate case. The Company addresses other environmental matters from time to time in the regular and ordinary course of its business. Management expects that future expenditures related to response action at any site will be recovered through rates or insurance, or shared among other potentially responsible parties. Therefore, the costs of responding to these sites are not expected to materially affect the results of operations, financial condition or cash flows of the Company. 4. Short-term debt At June 30, 1999, the Company had committed, short-term, unsecured bank credit facilities totaling $262.0 million, of which $250.9 million was unused. The Company also had aggregate uncommitted lines of credit totaling $73.0 million, of which $63.7 million was unused. The Company implemented a $250.0 million commercial paper program in October 1998. It is supported by a $250.0 million short-term, unsecured credit facility. The Company's commercial paper is rated A-2 by Standard and Poor's and P-2 by Moody's. At June 30, 1999, the Company had $89.8 million of commercial paper outstanding. 5. Statements of cash flows Supplemental disclosures of cash flow information for the nine- month periods ended June 30, 1999 and 1998 are presented below. Nine months ended June 30, ---------------------- 1999 1998 ------- ------ (In thousands) Cash paid for Interest $32,019 $31,491 Income taxes 14,324 14,880 6. Earnings per share Basic earnings per share has been computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share has been computed by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding during the period adjusted for the assumed exercise of restricted stock and other contingently issuable shares of common stock. Net income for basic and diluted earnings per share are the same, as there are no contingently issuable shares of stock whose issuance would have impacted net income. A reconciliation between basic and diluted weighted average common shares outstanding follows: For the three months ended June 30, -------------------------- 1999 1998 ------ ------ Weighted average common shares - basic 30,669 29,910 Effect of dilutive securities: Restricted stock 243 24 Stock options 8 7 ------ ------ Weighted average common shares - assuming dilution 30,920 29,941 ====== ====== For the nine months ended June 30, -------------------------- 1999 1998 ------ ------ Weighted average common shares - basic 30,464 29,739 Effect of dilutive securities: Restricted stock 236 195 Stock options 10 14 ------ ------ Weighted average common shares - assuming dilution 30,710 29,948 ====== ====== 7. Related party transactions Atmos owns a 45% interest through its ownership of Atmos Energy Marketing, LLC, in Woodward Marketing, LLC, a limited liability company headquartered in Houston, Texas, which is engaged in gas marketing and energy services. Included in purchased gas cost were purchases from WMLLC of approximately $24.8 million and $25.2 million for the three-month periods ended June 30, 1999 and 1998, respectively, and approximately $76.7 million and $105.2 million for the nine-month periods ended June 30, 1999 and 1998, respectively. 8. Recently issued accounting standards not yet adopted The Company has not yet adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income." The Statement will be effective for the Company's 1999 fiscal year beginning with its 1999 annual report. It established standards for reporting an display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company has not yet adopted Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information." The Statement will be effective for the Company's 1999 fiscal year beginning with its 1999 annual report. It establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. In the initial year of application, comparative information for earlier years is to be restated. In addition, the Company has not yet adopted Statement of Financial Accounting Standards No. 133 " Accounting for Derivative Instruments and Hedging Activities." The Statement will be effective for the Company's fiscal year 2001. It establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Statement does not allow retroactive application to financial statements of prior periods. The Company believes that adoption of these Statements will not have a material impact on its reported financial condition, results of operations, or cash flows. INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors Atmos Energy Corporation We have reviewed the accompanying condensed consolidated balance sheet of Atmos Energy Corporation as of June 30, 1999, and the related condensed consolidated statements of income and cash flows for the three-month and nine-month periods ended June 30, 1999 and 1998. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial state ments taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements at June 30, 1999, and for the three-month and nine-month periods ended June 30, 1999 and 1998 for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Atmos Energy Corporation as of September 30, 1998, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated November 10, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 1998, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP Dallas, Texas August 11, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The following discussion should be read in conjunction with the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q and Management's Discussion and Analysis contained in the Company's 1998 Annual Report to Shareholders and the Company's Annual Report on Form 10-K for the year ended September 30, 1998. The Company distributes and sells natural gas and propane to residential, commercial, industrial and agricultural customers in thirteen states. Such business is subject to regulation by state and/or local authorities in each of the states in which the Company operates. In addition, the Company's business is affected by seasonal weather patterns, competitive factors within the energy industry, and economic conditions in the areas that the Company serves. Cautionary Statement under the Private Securities Litigation Reform Act of 1995 The matters discussed or incorporated by reference in this Quarterly Report on Form 10-Q may contain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this Quarterly Report including, but not limited to, those contained in the following sections, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and Note 3 of notes to condensed consolidated financial statements, regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations, are forward- looking statements made in good faith by the Company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this Report or in any of the Company's other documents or oral presentations, the words "anticipate," "report," "objective," "forecast," "goal" or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements relating to the Company's operations, markets, services, rates, recovery of costs, availability of gas supply, and other factors. These risks and uncertainties include, but are not limited to, national, regional and local economic competitive conditions, regulatory and business trends and decisions, technological developments, Year 2000 issues, inflation rates, weather conditions, and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company. Accordingly, while the Company believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will be realized or will approximate actual results. Ratemaking Activity As of June 30, 1999, the Company had several rate proceedings pending. In May 1999, the Western Kentucky Division requested a rate increase of $14.1 million from the Kentucky Public Service Commission. In June 1999, the Trans La Division appeared before the Louisiana Public Service Commission for a rate investigation and to redesign rates to mitigate the effects of warm weather. Decisions in both cases are expected later in 1999. However, new rates will not likely be placed in effect before late 1999 or early 2000. Subsequent to June 30, 1999, the Energas Division filed two rate cases in Texas, requesting rate increases totaling approximately $13.2 million and recovery of costs related to certain distribution system replacement projects. In late 1999 or early 2000 the Company plans to file an additional rate request for approximately $1.1 million with the Railroad Commission of Texas for the environs areas outside the city limits of the West Texas System cities and Amarillo, Texas for total increases sought by the Energas Division of $14.3 million. For additional information regarding ratemaking activity see Note 2 under notes to condensed consolidated financial statements. Year 2000 issues The Year 2000 issues arose because many computer systems and software applications as well as embedded computer chips in plant and equipment currently in use were constructed using an abbreviated date field that eliminates the first two digits of the year. On January 1, 2000, these systems, applications and embedded computer chips may incorrectly recognize the date as January 1, 1900. Accordingly, many computer systems and software applications, as well as embedded chips, may incorrectly process financial and operating information or fail to process such information completely. The Company has been aware of these issues and is addressing their potential effects on its computer systems, software applications and plant and equipment. State of readiness In October 1996, the Company established its Year 2000 Project Team with the mission of ensuring that all critical systems, facilities and processes are identified, analyzed for Year 2000 readiness, corrected if necessary, and tested if changes are necessary. The Year 2000 Project Team is headed by an officer of the Company and consists of representatives from all business units and shared services units of the Company. The Company, including all of its departments and business units, has a Year 2000 strategy in place and is continuing to implement the Year 2000 plan to manage and minimize risks associated with the Year 2000 issues. The Company also received comprehensive assessments in April and July 1999, updating an earlier assessment completed in June 1998, by an independent consulting firm, which specializes in such matters, of the risks posed for the Company and its business units by the Year 2000 issues, including assessments of the risks in each area of the Company involving the use of computer technology and assessments of the business and legal risks created for the Company by the Year 2000 issues. Such assessments also addressed the risks associated with the Company's embedded technologies such as micro-controllers or microchips embedded in non-information technology-related equipment. The results of the latest assessment demonstrate that the Company is on track toward meeting its goal of completing all Year 2000 readiness related tasks by September 30, 1999. With respect to information technology ("IT") systems, the Company has conducted an inventory and review of its application software on all platforms such as the mainframe, local area network and personal computers and is in the process of remediating all Year 2000 issues relating to such systems. Concerning non-IT systems, including embedded technology, the Company has conducted an inventory of and is continuing to review and evaluate all of its telecommunications, security access and building control systems, forms, reports and other business processes and activities as well as the equipment and facilities utilized in the Company's gas distribution and storage systems. In addition, several members of the Year 2000 Project Team have completed training on an American Gas Association-sponsored database relating to testing of embedded technology. This database has helped to expedite the review and compliance efforts related to embedded technology. The Company's Year 2000 plan includes specific timetables for the following categories of tasks for each of its shared services units and business units with respect to both IT systems and embedded technology as follows: - - Identification of Year 2000 issues--completed; - - Prioritization of Year 2000 issues--completed; - - Estimation of total Year 2000-related costs--completed; - - Implementation of Year 2000 solutions--in process and to be completed by September 30, 1999; - - Testing of Year 2000 solutions--in process and to be completed by September 30, 1999; - - Certification of Year 2000 readiness by third party vendors and suppliers--in process and to be completed by September 30, 1999; - - Monitoring of all systems for changes in current systems that would require changes in Year 2000 plan--in process and to be completed by September 30, 1999; - - Development of Year 2000 contingency plans--substantially completed; - - Final Year 2000 tests--to be conducted starting September 30, 1999. The Company is also continuing to conduct an inventory and review of mission critical computer systems provided by outside vendors. The Year 2000 Project Team is continuing to contact all major vendors to coordinate their Year 2000 readiness schedules with those of the Company. The Company is requiring vendors who provide mission critical goods or services to submit to the Company their readiness plans and to certify readiness in order to continue to do business with the Company. As discussed above, the Company is also in the process of testing vendor products that provide mission critical goods or services to ensure their Year 2000 readiness. In addition, the Company has identified its key suppliers, including gas suppliers and gas pipelines, and is communicating with them, including conducting on-site visits, for the purpose of evaluating the status of their solutions to their respective Year 2000 issues. The expected date of completion of these procedures is September 30, 1999. Costs to address Year 2000 issues As of June 30, 1999, the Company had incurred a total of approximately $450,000 in direct fees and expenses (excluding any internal labor charges) in connection with its Year 2000 efforts. The Company currently expects to spend approximately $1.0 million in direct fees and expenses on its Year 2000 efforts by December 31, 1999. In addition, as part of its normal systems upgrade in the ordinary course of business, the Company is in the process of replacing its customer information system, and has replaced its accounting and financial reporting system, and human resources system with systems that happen to be Year 2000 ready. Although these systems, when fully installed, will be Year 2000 ready, the replacement of these systems was not accelerated to 1999 solely in an attempt to address Year 2000 issues. Risks of Year 2000 issues and contingency plans The Company has identified what it believes are its most reasonably likely worst case Year 2000 scenarios. These scenarios are (i) interference with the Company's ability to receive and deliver gas to customers; (ii) interference with the Company's ability to communicate with customers; and (iii) the temporary inability to send invoices to and receive payments from customers. The most reasonably likely worst case scenario associated with the Year 2000 issues would be the Company's inability to continue to transport and distribute gas to its customers without interruption. In the event the Company and/or its suppliers and vendors are unable to remediate critical Year 2000 issues prior to January 1, 2000, the ability of the Company to deliver gas to its customers without interruption could be impacted. In order to address this worst case scenario, the Company has developed contingency plans to continue to deliver gas primarily through manual intervention and other procedures should it become necessary to do so. Such procedures include back-up power supply for its critical distribution and storage operations and, if necessary, curtailment of supply. The Company's storage capacity would be used to supplement system supply in the event its suppliers or gas pipelines are unable to make deliveries. With respect to communications with customers, which is heavily reliant on services provided by third parties, the Company is continuing to evaluate Year 2000 readiness by such third parties and will continue to refine its contingency plans to address any worst case scenarios that may be determined after such evaluations are complete. Concerning the billing and payment systems, as previously discussed, the Company is in the process of replacing its customer information system, and has replaced its accounting and financial reporting system, and human resources system with systems that are Year 2000 ready, which should substantially diminish the risk of Year 2000 issues. Nevertheless, the Company has developed contingency plans and will continue to refine such plans in case the billing and payment systems prove not to be Year 2000 ready. Despite the Company's efforts, there can be no assurance that all material risks associated with Year 2000 issues relating to systems within its control will have been adequately identified and corrected before the end of 1999. However, as the result of its Year 2000 plan and the replacement of the customer information system, accounting and financial reporting system, and human resources system in 1999, the Company does not believe that in the aggregate, Year 2000 issues with respect to both its own IT and non-IT systems will be material to its business, operations or financial condition. On the other hand, while the Company is in the process of researching the Year 2000 readiness of its suppliers and vendors, the Company can make no representations regarding the Year 2000 readiness status of systems or parties outside its control, and currently cannot assess the effect on it of any non-readiness by such systems or parties. All statements concerning Year 2000 issues other than historical statements, including, without limitation, estimated costs and the projected timetable of Year 2000 readiness, constitute "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements were made in good faith by the Company and are intended to qualify for the safe harbor from liability established by that Act. Weather and Seasonality The Company's natural gas and propane distribution businesses are seasonal due to weather conditions in the Company's service areas. Sales are affected by winter heating season requirements. Sales to agricultural customers (who use natural gas as fuel in the operation of irrigation pumps) during the period from April through September are affected by rainfall amounts. These factors generally result in higher operating revenues and net income during the period from October through March of each year and lower operating revenues and either net losses or lower net income during the period from April through September of each year. Weather for the nine months ended June 30, 1999 was 16% warmer than normal and 12% warmer than weather in the corresponding period of the prior year. Rainfall in the Company's primary irrigation market located around Lubbock, Texas totaled 17.5 inches for the nine months ended June 30, 1999 as compared with 8.4 inches for the corresponding period of the prior year. These factors decreased sales volumes to weather sensitive customers and caused net income to decrease approximately $23.5 million or $.76 per share. The Company has weather normalization adjustments ("WNAs") in Georgia and Tennessee, where it serves approximately 170,000 customers or approximately 17% of the Company's total customers and revenues. The WNAs increase the base rate when weather is warmer than normal and decrease it when weather is colder than normal. The effect of the WNAs was to increase revenues approximately $4.4 million for the nine months ended June 30, 1999, as compared with an increase of approximately $.7 million for the nine months ended June 30, 1998. The Company does not have WNAs in its other service areas. FINANCIAL CONDITION For the nine months ended June 30, 1999 net cash provided by operating activities totaled $106.8 million compared with $98.8 million for the nine months ended June 30, 1998. Net income decreased $20.3 million to $38.9 million for the nine months ended June 30, 1999 from $59.2 million for the nine months ended June 30, 1998. Depreciation and amortization increased $4.0 million in 1999 because of utility property additions, primarily Customer Service Initiative investment, placed in service during the past year. Net operating assets and liabilities decreased $17.1 million for the nine months ended June 30, 1999 compared with an increase of $.7 million for the nine months ended June 30, 1998. This decrease in net operating assets and liabilities resulted primarily from large fluctuations in accounts receivable, accounts payable and inventories of gas in underground storage that occur when entering and leaving the winter or heating season. It also reflected an increase of $7.4 million in deferred charges and other assets related primarily to increased deferred retirement cost and pension assets. Deferred income taxes increased $6.3 million for the nine months ended June 30, 1999 due to costs expensed for tax purposes but capitalized for financial reporting purposes. Deferred credits increased $8.6 million due to increased retiree medical obligations and deferred retirement liabilities. Major cash flows used in investing activities for the nine months ended June 30, 1999 included capital expenditures of $79.8 million compared with $82.5 million for the nine months ended June 30, 1998. The capital expenditures budget for fiscal 1999 is currently $86.8 million, as compared with actual capital expenditures of $135.0 million in fiscal 1998. Budgeted capital projects include major expenditures for mains, services, meters, vehicles and computer software and equipment. These expenditures will be financed from internally generated funds and financing activities. For the nine months ended June 30, 1999, cash flows used in financing activities amounted to $21.5 million as compared with $16.9 million for the nine months ended June 30, 1998. During the nine month period, notes payable increased $43.8 million, as compared with an increase of $2.0 million in the nine months ended June 30, 1998, due to seasonal factors, project costs of CSI and Oracle enterprise systems implementation. Payments of long-term debt totaled $56.7 million for the nine months ended June 30, 1999 as compared with $11.8 million for the nine months ended June 30, 1998. The Company paid $25.3 million in cash dividends during the nine months ended June 30, 1999, compared with dividends of $23.8 million paid during the nine months ended June 30, 1998. This reflects increases in the quarterly dividend rate and in the number of shares outstanding. In the nine months ended June 30, 1999, the Company issued 640,973 shares of common stock. The following table presents the number of shares issued under the various plans for the nine-month periods ended June 30, 1999 and 1998. Nine months ended June 30, --------------------- 1999 1998 ------- ------- Shares issued: Restricted Stock Grant Plan 56,850 111,250 Employee Stock Ownership Plan 52,738 32,235 Direct Stock Purchase Plan 524,494 373,401 Outside Directors Stock-for-Fee Plan 1,341 1,736 United Cities Long-term Stock Plan 5,550 55,500 ------- ------- Total shares issued 640,973 574,122 ======= ======= The Company believes that internally generated funds, its short-term credit facilities, commercial paper program and access to the debt and equity capital markets will provide necessary working capital and liquidity for capital expenditures and other cash needs for the remainder of fiscal 1999. At June 30, 1999 the Company had $262.0 million in committed short-term credit facilities, $250.9 million of which was unused. The committed lines of credit are renewed or renegotiated at least annually. At June 30, 1999, the Company also had $73.0 million of uncommitted short-term lines of credit, of which $63.7 million was unused. In addition, the Company had a $250.0 million commercial paper program, of which $160.2 million was unused. The program is supported by a $250.0 million line of credit. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1999, COMPARED WITH THREE MONTHS ENDED JUNE 30, 1998 Operating revenues decreased by 20% to $109.6 million for the three months ended June 30, 1999 from $137.3 million for the three months ended June 30, 1998. The most significant factor contributing to the decrease in operating revenues was a 10% decrease in total throughput. Nonutility sales volumes decreased 4.0 billion cubic feet ("Bcf") primarily because of an unusually wet spring in the farming area surrounding Lubbock, Texas. Rainfall for the quarter ended June 30, 1999 was 11.46 inches compared with 1.75 inches for the quarter ended June 30, 1998. The total volume of gas sold and transported for the three months ended June 30, 1999 was 34.5 Bcf compared with 38.3 Bcf for the three months ended June 30, 1998. The average sales price per Mcf sold decreased $.47 to $4.54 primarily due to a decrease in the average cost of gas. The average cost of gas per Mcf sold decreased 21% to $2.57 for the three months ended June 30, 1999 from $3.24 for the three months ended June 30, 1998 due to increased supply availability in the current market. Gross profit decreased by 7% to $53.4 million for the three months ended June 30, 1999, from $57.4 million for the three months ended June 30, 1998. Most of the decrease in gross profit was due to the decrease in volumes sold to agricultural customers and decreased transportation revenues. Changes in cost of gas do not directly affect gross profit. Operating expense increased 7% to $53.0 million for the three months ended June 30, 1999 from $49.5 million for the three months ended June 30, 1998. Operation expense in the 1999 quarter was comparable to the 1998 quarter, except for one-time savings from the merger and integration of United Cities that were realized in 1998. Third quarter results were also affected by the regulatory lag of depreciation and interest expense related to assets placed in service but not yet included in rates. The decrease in taxes other than income taxes was related to taxes on decreased revenues and payroll taxes related to the reduced labor force. Operating income decreased $7.5 million for the three months ended June 30, 1999 to $.4 million from $7.9 million for the three months ended June 30, 1998. The decrease in operating income resulted from decreased gross profit and increased operating expenses, as mentioned above. United Cities Propane sold 1.7 million gallons of propane for the quarter ended June 30, 1999, as compared with 2.2 million gallons for the quarter ended June 30, 1998. The decrease of $.9 million in propane revenues for the quarter ended June 30, 1999 compared with the same period last year was the result of lower sales volumes due to warmer weather and a lower average sales price due to comparatively lower cost of supply. Other income decreased $1.4 million for the three months ended June 30, 1999 compared with the three months ended June 30, 1998 primarily due to a decrease in the earnings from the Company's 45 percent interest in Woodward Marketing LLC, and a $.5 million gain that was realized on the sale of an airplane in the prior year. Interest expense increased $1.9 million, or 24%, for the three months ended June 30, 1999 compared with the three months ended June 30, 1998 due to increased average debt outstanding, higher interest rates and a significant reduction in interest capitalized in 1999. Approximately $1.0 million of interest was capitalized in connection with the CSI project that was in process in the quarter ended June 30, 1998. Income taxes decreased $3.8 million in the quarter ended June 30, 1999 compared with the corresponding quarter of the prior year due primarily to decreased pre-tax income. Net income decreased for the three months ended June 30, 1999 by $7.0 million from $1.7 million for the three months ended June 30, 1998. This decrease in net income resulted primarily from the decrease in operating income discussed above. NINE MONTHS ENDED JUNE 30, 1999, COMPARED WITH NINE MONTHS ENDED JUNE 30, 1998 Operating revenues decreased by 19% to $581.2 million for the nine months ended June 30, 1999 from $721.2 million for the nine months ended June 30, 1998. Factors contributing to the lower operating revenues were 9% decrease in total throughput and a 9% decrease in gas sales revenues per Mcf. Sales volumes to weather sensitive customers decreased 9.8 Bcf for the nine months ended June 30, 1999 compared with the corresponding period of the prior year due to 12% warmer weather. Weather was 16% warmer than 30- year normals. Sales volumes to nonutility industrial and agricultural customers were reduced 35% by increased rainfall in the Company's primary irrigation service area around Lubbock, Texas. The average sales price per Mcf decreased to $4.48 for the nine months ended June 30, 1999 from $4.91 for the nine months ended June 30, 1998. The decrease in the average sales price reflects a decrease in the average cost of gas. The average cost of gas per Mcf sold decreased to $2.73 for the nine months ended June 30, 1999 from $3.28 for the nine months ended June 30, 1998 because of generally lower gas supply costs as a result of increased supply availability in the current market. Decreased cost of gas does not directly affect gross profit. Gross profit decreased 8.5% to $257.0 million for the nine months ended June 30, 1999, compared with $280.9 million for the nine months ended June 30, 1998. The decrease in gross profit was due to reduced sales to weather-sensitive customers, decreased sales to agricultural customers, decreased transportation volumes, and a decrease of $.07 for the average transportation revenue per Mcf. United Cities Propane sold 18.4 million gallons of propane for the nine-month period ended June 30, 1999, as compared with 19.6 million gallons for the nine-month period ended June 30, 1998. The decrease of $5.4 million in propane revenues for the nine- month period ended June 30, 1999 compared with the same period last year was the result of lower sales volumes due to warmer winter weather and a lower average sales price due to comparatively lower cost of supply. Operating expenses increased to $174.0 million in the nine months ended June 30, 1999, from $164.9 million in the nine months ended June 30, 1998. The increase included $3.4 million in operation expense, $3.3 million in a litigation settlement and $5.3 million in depreciation and amortization. The principal factor contributing to the increase in operation expense was a one- time savings realized in the prior year in connection with integration and reorganization initiatives for United Cities Gas Company. The litigation settlement in 1999 is discussed in Note 3 of notes to consolidated financial statements. The increase in depreciation related to utility plant additions, including much of the Company's investment in CSI, placed in service during the past year. Regulatory lag has affected earnings as a result of significant capital investments which have been made but not yet included in rates. The primary factor in the $1.6 million decrease in taxes other than income taxes was lower taxes on decreased revenues. Operating income decreased for the nine months ended June 30, 1999 to $82.9 million from $116.0 million for the nine months ended June 30, 1998. The decrease in operating income resulted from decreased gross profit and increased operating expenses, as discussed above. Other income decreased $.3 million for the nine months ended June 30, 1999 compared with the nine months ended June 30, 1998, due primarily to a $.5 million gain that was realized on the sale of an airplane in the prior year. Interest charges increased $.5 million, or 2%, due to an increased amount of debt outstanding and higher rates during the nine months ended June 30, 1999 compared with the corresponding nine-month period of the prior year. Net income decreased 34% for the nine months ended June 30, 1999, to $38.9 million from $59.2 million for the nine months ended June 30, 1998. The decrease in net income resulted primarily from the decrease in operating income. The Company estimates that the impact of the weather being 12% warmer than for the nine months ended June 30, 1998 caused net income to be approximately $23.5 million less than it would have been had the Company experienced comparable temperatures and rainfall in its respective service areas in the nine months ended June 30, 1999. Dividends per share increased approximately 4% to $.825 for the nine months ended June 30, 1999. Diluted average shares outstanding increased 2.5% primarily due to shares issued under the Direct Stock Purchase Plan, the Restricted Stock Grant Plan and the Employee Stock Ownership Plan. The provision for income taxes for the nine months ended June 30, 1999 decreased $13.6 million from the provision for the corres ponding period of the prior year due to decreased pre-tax income. Total customers of the Company at June 30, 1999 increased 23,978, or 2%, compared with June 30, 1998. June 30, -------------------------- 1999 1998 ---------- ---------- Meters-in-service at end of period Residential 903,081 888,015 Commercial 94,590 95,355 Public authority and other 6,405 4,841 Industrial (including agricultural) 15,702 16,399 --------- ---------- Total natural gas meters 1,019,778 1,004,610 Propane customers 39,429 30,619 --------- ---------- Total 1,059,207 1,035,229 ========= ========== UTILITY, NONUTILITY AND PROPANE OPERATING DATA Atmos' Utility business is conducted by the Company's regulated utility divisions: Energas Division, Greeley Gas Division, Trans La Division, United Cities Division, Western Kentucky Division and Shared Services. The Nonutility business includes nonregulated irrigation sales, energy services to large volume customers, nonregulated underground storage operations, a 45% interest in Woodward Marketing LLC, leasing of real estate, vehicles and appliances and nonregulated shared services. The propane business is conducted through United Cities Propane and includes wholesale and retail propane sales to 39,429 customers in four states. The following tables summarize operating statistics, of the utility, nonutility and propane businesses of the Company for the three-month and nine-month periods ended June 30, 1999 and 1998. Certain prior year volumes and revenues have been restated accordingly. ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS Three months ended June 30, 1999 1998 Utility sales volumes -- MMcf(1) -------- -------- Residential 9,379 8,206 Commercial 4,423 4,608 Public authority and other 836 438 Industrial 4,023 4,206 ------- ------ Total 18,661 17,458 Transportation volumes -- MMcf(1) 12,631 13,644 ------- ------ Total utility volumes 31,292 31,102 Nonutility sales volumes 3,229 7,237 ------- ------ TOTAL THROUGHPUT - MMcf (1) 34,521 38,339 ======= ====== Propane - Gallons (000's) 1,681 2,189 ======= ====== OPERATING REVENUES (000's) Gas sales revenues Residential $52,452 $56,643 Commercial 20,853 26,110 Public authority and other 3,066 2,669 Industrial 13,409 16,363 -------- -------- Total gas sales revenues 89,780 101,785 Transportation revenues 5,149 7,507 Other gas revenues 1,054 1,249 -------- -------- Total utility revenues 95,983 110,541 Propane revenues 1,776 2,720 Nonutility revenues 11,831 24,050 -------- -------- Total operating revenues $109,590 $137,311 ======== ======== Average gas sales revenues per Mcf $ 4.54 $ 5.01 Average transportation revenue per Mcf $ .41 $ .55 Cost of gas per Mcf sold $ 2.57 $ 3.24 HEATING DEGREE DAYS Weighting by Three months ended June 30, Service Area Customers 1999 1998 Normal - ---------------- ----------- ----- ----- ------ Energas 29% 279 271 227 Trans La 8% 26 74 42 Western Kentucky 18% 165 259 336 Greeley Gas 20% 606 567 613 United Cities 25% 189 256 288 ---- System Average 100% 277 304 318 (1) Volumes are reported as metered in million cubic feet ("MMcf"). ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS Nine months ended June 30, 1999 1998 Utility sales volumes -- MMcf(1) -------- -------- Residential 61,872 68,077 Commercial 27,618 32,060 Public authority and other 5,304 4,504 Industrial 16,366 17,679 -------- ------- Total 111,160 122,320 Transportation volumes -- MMcf(1) 42,334 42,733 -------- ------- Total utility volumes 153,494 165,053 Nonutility sales volumes 7,817 12,083 -------- ------- TOTAL THROUGHPUT - MMcf (1) 161,311 177,136 ======== ======= Propane - Gallons (000's) 18,387 19,614 ======== ======= OPERATING REVENUES (000's) Gas sales revenues Residential $309,508 $367,208 Commercial 124,523 162,192 Public authority and other 20,087 18,275 Industrial 55,888 74,819 -------- -------- Total gas sales revenues 510,006 622,494 Transportation revenues 17,599 20,763 Other gas revenues 3,757 6,705 -------- -------- Total utility revenues 531,362 649,962 Propane revenues 19,097 24,538 Nonutility revenues 30,784 46,692 -------- -------- Total operating revenues $581,243 $721,192 ======== ======== Average gas sales revenues per Mcf $ 4.48 $ 4.91 Average transportation revenue per Mcf $ .42 $ .49 Cost of gas per Mcf sold $ 2.73 $ 3.28 HEATING DEGREE DAYS Weighting by Nine months ended June 30, Service Area Customers 1999 1998 Normal - ---------------- ----------- ----- ----- ------ Energas 29% 3,028 3,665 3,513 Trans La 8% 1,263 1,725 1,771 Western Kentucky 18% 3,446 3,768 4,304 Greeley Gas 20% 4,856 5,294 5,571 United Cities 25% 3,136 3,539 3,760 ---- System Average 100% 3,319 3,790 3,949 (1) Volumes are reported as metered in million cubic feet ("MMcf"). Item 3. Quantitative and Qualitative Disclosures about Market Risk All of the Company's long-term debt is fixed-rate and, therefore, does not expose the Company to the risk of earnings or cash flow loss due to changes in market interest rates. At June 30, 1999, the Company is not engaged in other contracts which would cause exposure to the risk of material earnings or cash flow loss due to changes in market commodity prices, foreign currency exchange rates, or interest rates. PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note 3 of notes to consolidated financial statements herein for a description of legal proceedings. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits A list of exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Exhibits Index, which immediately precedes such exhibits. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ATMOS ENERGY CORPORATION (Registrant) Date: August 13, 1999 By: /s/ Donald P. Burman ------------------------------- Donald P. Burman Assistant Controller (Chief Accounting Officer and duly authorized signatory) EXHIBITS INDEX Item 6(a) Exhibit Page Number Description Number - ------- ----------- ------- 15 Letter regarding unaudited interim financial information 27 Financial Data Schedule for Atmos Energy Corporation for the nine months ended June 30, 1999 EX-15 2 AUDITOR'S REVIEW LETTER EXHIBIT 15 ---------- Board of Directors Atmos Energy Corporation We are aware of the incorporation by reference in the Registra- tion Statements (Form S-3 No. 33-37869, Form S-3 No. 33-70212, Form S-3 D/A No. 33-58220, Form S-3 No. 33-56915, Form S-3/A No. 333-03339, Form S-3/A No. 333-32475, Form S-3/A No. 333-50477, Form S-4 No. 333-13429, Form S-8 No. 33-57687, Form S-8 No. 33- 68852, Form S-8 No. 33-57695, Form S-8 No. 333-32343, Form S-8 No. 333-46337, Form S-8 No. 333-73143, and Form S-8 No. 333- 73145) of Atmos Energy Corporation of our report dated August 11, 1999, relating to the unaudited condensed consolidated interim financial statements of Atmos Energy Corporation which are in- cluded in its Form 10-Q for the quarter ended June 30, 1999. Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. ERNST & YOUNG LLP August 13, 1999 Dallas, Texas EX-27 3 FDS FOR QE 06/30/99
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE NINE MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS SEP-30-1999 JUN-30-1999 PER-BOOK 948,960 0 105,471 123,573 0 1,178,004 155 288,301 112,922 401,378 0 0 381,389 20,400 0 89,828 18,218 0 3,219 419 263,153 1,178,004 581,243 22,336 498,300 520,636 60,607 5,201 65,808 26,928 38,880 0 38,880 25,327 8,880 106,751 1.28 1.27
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